Metro Vancouver Industrial Report Fourth Quarter 2010
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Metro Vancouver Industrial Report Fourth Quarter 2010 Municipal Vacancy Rates
Economic Summary Despite a steady, if slightly rocky 3rd quarter, Canada’s economy has recovered to pre-2008 levels as investors have regained confidence, a trend that is evidenced in the increase in construction investment and increases in permit applications. Non-residential permit were up 26.7% in September, following a 24.2% decline in August. Total new construction investment was up to $10.55 billion, up from $10.02 billion last year (a 5.3% increase) and up 2% from last quarter’s $10.34 billion.
Increase in vacancy Decrease in vacancy
9.12% 7.29%
4.26% 3.65%
4.04%
3.72%
3.29%
3.15%
2.79%
2.28% 1.47%
1.47%
1.31%
Abbotsford
Vancouver
Surrey
Richmond
Port Coquitlam
New Westminster
Maple Ridge
Langley
Delta
Coquitlam
Burnaby
Overall
North Vancouver
Employment followed similar trends with a drop to the end of the quarter, but regaining its footing into the 4th quarter. Due to the start of quarter downturn, Canada only averaged about 5700 new jobs and most of these were regained in October and November. This is down from the average of 51000 in the first half of 2010. Unemployment held steady, but is still up 2.2% from this time last year. Construction employment fell 27,000 in December, but is still up 4.8% from last year, and with new investment into construction, employment prospects look good.
Metro Vancouver Market Summary Source: DTZ Barnicke
The Metro Vancouver Industrial Market had a steady quarter, with sales up significatly, and vacancy down. Industrial sales continued their recovery, up to a total of $171,000,000 this quarter, a large increase from last quarter’s $135,000,000, but still shy of last year’s $194,000,000. Vacant space across the area fell to 7,834,656 square feet (4.26%) down 46 basis points from last quarter’s 4.72%. Strata and small box spaces continued to drive the market.
7.0
4.50%
New supply Vacancy rates
6.0
4.00% 3.50%
5.0
(Millions of Sq Ft)
Despite the drop in vacancy, the large increases in supply over the last few quarters have ensured that prospecting tenants have many options. This has had a lowering effect on rental rates, to the point where in some areas the rates have reached 2006 levels.
Historic Vacancy and New Supply
3.00%
4.0
2.50%
3.0
2.00% 1.50%
2.0
1.00%
Larger box spaces continued to have issues moving, many of which have been sitting on the market for up to and over a year. Small to mid range (2000 - 20000 square feet) product continues to drive the Metro Vancouver Market.
1.0 0.0
Vancouver • North Vancouver • Burnaby
0.50% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YTD
0.00%
Source: DTZ Barnicke
The City of Vancouver saw a busy quarter. Vacancy rates decreased considerably, down 109 basis points from last quarter to 2.79%. Vacancy dropped fairly sharply in Vancouver from 3.88% to 2.79%. Once again, much like the rest of the GVRD, North Vancouver had a fairly busy quarter, with the vacancy rate dropping a full 243 basis points to 1.47%. The new supply at the Dollarton Business Park sold quickly, and in North Vancouver’s historically static market this is not surprising. Brand
Metro Vancouver Industrial Report - Fourth Quarter 2010
Address
Significant industrial leases of Q3 2010 Municipality Size (sq ft) Tenant
927 Derwent Way 3023 188th Street 7530 Hopcott Road 917 Cliveden Avenue 16131 Blundell Road
02
Delta Surrey Delta Delta Richmond
155,000 132,000 116,570 115,646 111,000
Euro-Asia Transload Cold Logic Pty Ltd. Northgate Terminals Ltd. Merlin Plastic Supply Inc. Kuehne & Nagel Ltd.
Source: DTZ Barnicke
Metro Vancouver Industrial Report Fourth Quarter 2010 new industrial space in North Vancouver is a rare occurrence. However, the lack of possibilities for new supply has and will continue to have a inflating effect on rental rates. For average industrial space, more than 2/3rds of available spaces in North Vancouver is over $10 per square foot. Like the rest of the Greater Vancouver area, owners are having a hard time leasing out larger spaces, however due to their rarity in North Vancouver, the rental rates are still high and going up. While there has been new construction, it does not seem to be enough to keep up with demand. Most of the new supply is coming to the market fully leased or sold. Q4 saw about $12,118,410 in sales, up from $4,702,000 from last quarter. This is largely due to the sale of the strata units in the new Dollarton Business Park. Burnaby had a busy quarter in terms of supply. It was one of the few areas in the Greater Vancouver Area that had an increase in vacancy, if only slightly, up 30 basis points from last quarter to rest at 3.65%. This is due to the fact that Burnaby was home to the largest number of completed projects this quarter. New supply at the North Fraser Corporate Centre, Burnaby Business Park and Glenwood ensured that the city of Burnaby kept just one step ahead of the demand. This new supply has also had a dampening effect on rental rates, bringing them down to rates last seen in 2006. Northeast Sector • Ridge Meadows Much like the rest of the Greater Vancouver area, the Tri-Cities saw a fairly steep drop in vacancy rates. This was largely due to 91-93 Glacier Street being taken off the market when it was leased to Uni-Select Pacific. The Ridge Meadows area saw very little activity in the 4th Quarter. Vacancy dropped off slightly as 17,000 square feet was taken off the market
Region
Richmond • Delta Richmond saw a strong sales activity this quarter fueled by demand for small bay spaces (2,000-10,000 square feet). Despite a large volume of new supply, prices and lease rates have continued to rise in the area. Total vacancy in Richmond increased by 47 basis points to reach 3.79%. Delta has also seen an increase in vacancy by 147 basis points to 9.29%. Both cities have seen a large amount of new supply (over 300,000 square feet this quarter), which has contributed to these rates. Following the regional trend, larger spaces have had trouble attracting interest. This has particularly affected this submarket due to the number of larger bay properties that came on the market this quarter (20,000 to 100,000 square feet). Surrey • Langley • Abbotsford The Fraser Valley saw slow activity, and some new supply in the 4th quarter. Small to mid size spaces drove much of the market’s activity. Due to continued oversupply, the Valley once again saw an slight increase in vacancy, up 13 basis points from 4.69% to 4.82%. Abbotsford saw a slight decrease in vacancy, dropping 13 basis points from 2.66% to 2.53%. This occured despite the nearly 100,000 square feet of new supply that came with the completion of the Maclure Business Park, and the 40,000 square feet at the Queen Street Business Park. Langley also saw a slight dip in vacancy, falling 16 basis points to sit at 7.29%. Surrey was one of the few locations to see an increase in vacancy, but this was due, in large part, to 190,000 square feet that came on the market at 1125 124th Street.
Metro Vancouver industrial statistics Q4 2010 Total inventory (sq ft) Total vacant (sq ft) Vacancy rate
Abbotsford Burnaby Coquitlam
5,033,248 27,259,152 8,564,142
127,159 995,915 269,960
2.53% 3.65% 3.15%
Average asking lease rate PSF* (NNN) $6.95 $8.60 $8.20
Delta
21,698,012
1,979,186
9.12%
$7.40
15,508,095 2,087,572 3,923,000 4,770,387 8,521,663 34,229,972 28,891,515 23,558,246 184,045,004
1,130,175 30,689 145,985 70,046 194,523 1,127,080 1,168,021 657,258 7,895,997
7.29% 1.47% 3.72% 1.47% 2.28% 3.29% 4.04% 2.79% 4.27%
$7.40 $8.80 $6.50 $13.00 $8.20 $8.95 $8.05 $10.30 -
Langley Maple Ridge/Pitt Meadows New Westminster N. Vancouver Port Coquitlam Richmond Surrey Vancouver Total
Metro Vancouver Industrial Report - Fourth Quarter 2010
03
Source: DTZ Barnicke
Metro Vancouver Industrial Report Fourth Quarter 2010 Top industrial sales of Q4 2010** Address
Municipality
1700 No. 6 Road 70 Golden Drive 12280 Trites Road Unit 4&5 7978 North Fraser Way 201-217 West 6th Avenue Unit 1, 7978 North Fraser Way
Richmond Coquitlam Richmond Burnaby Vancouver Burnaby
Address
Municipality
12100 Hartnell Road 22650 Fraser Highway Lot 3 Townline Road 9712 190th Street
Richmond Langley Abbotsford Surrey
Size (sq ft)
Price
205,170 52,000 70,417 37,101 19,540 29,039
$14,700,000 $8,500,000 $7,775,000 $5,204,500 $4,580,000 $4,319,084
Price/sq ft
$72 $163 $110 $140 $234 $149
Top industrial land sales of Q4 2010** Size (acres) Price Price/Acre
21.3 7.5 12.69 2.33
$21,000,000 $6,152,559 $4,902,000 $3,150,000
$985,915 $860,112 $386,167 $1,354,839
Profile Purchaser
Investor User Developer Investor Investor Investor
Hungerford Group Smithrite Disposal ltd. Southstreet Development 08889862 B.C. Ltd. Red Spruce Investments Wyatt Holdings Inc.
Profile Purchaser
Government Investor Government Investor
City of Richmond Tall Crane Equipment Ltd City of Abbotsford Two Pillars Holdings
DTZ Barnicke Industrial Team
Looking Ahead • ●While there was little new supply this quarter, there are a number of projects that are aiming for completion in the Summer & Fall of 2011. This means that rates will increase as supply decreases, leaving the market primed for new supply to pull in the highest possible lease rates. These conditions have created a competition among developers to see who can finish first, and which will be the next big office/industrial development completed in Vancouver. • ●Since economic conditions are not recovering as quickly as some hoped, investors will continue to be careful. While we expect investor interest to continue to increase, the rocky economic conditions of the last couple years continues to stunt investment and new construction.
• Despite the continued new supply, the
market demand has surpassed what developers have been able to provide. This has resulted in low vacancy rates, but due to the continued new supply, and often stable vacancy rates, we expect the rental rates across the Metro Vancouver Market may continue to drop for average warehouse space, and increase for small, quality, flex strata space.
Casey Bell Steve Caldwell Tony Capolongo Don Mussenden Mitch Ellis Mark Elworthy Anthony Lux Chris McIntyre Ryan Saunders Rand Thomson
Definitions Absorption: Refers to growth or net change in occupied space over time. Inducements: A form of monetary enticement given by a landlord to a tenant. New Supply: New space entering the market through new construction. Under Construction: Projects that are currently being built but are not yet completed. Vacancy Rate: The current amount of vacant building area compared to the total amount of existing inventory.
For more information please contact: James Fraser, Director of Research james.fraser@dtzvancouver.com (604) 630 3405
*Properties over 10,000 sq ft only
DTZ Barnicke Vancouver Limited
800 - 475 West Georgia Street, Vancouver, B.C. V6B 4M9 Tel: (604) 684 7117 Fax: (604) 684 1017
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**Data sourced from RealNet Canada Inc. www.realnet.ca
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